3.12 Absorption and activity based costing

Content	Additional information
The use of absorption costing to calculate the total cost of a product.	The use of absorption costing will include understanding relevant terminology: allocation, apportionment, absorption, under-absorption, over-absorption. Calculations are for: allocation of direct costs apportionment of indirect costs overhead absorption rates.
The use of activity based costing (ABC) to calculate the total cost of a product.	The use of activity based costing will include understanding relevant terminology: cost pool, cost driver, attribution. Calculations are for: allocation of direct costs use of cost pools and cost drivers to attribute indirect costs to particular products.
Use of absorption and ABC to calculate the selling price of a product.
The benefits and limitations of absorption, ABC and marginal costing.	The benefits and limitations could include the comparison of inventory valuations and profit calculations made using absorption, ABC and marginal costing.